An emerging trend in which inflation is slowing down is expected to continue into 2024 with inflation rates potentially easing to an estimated 5.1%, symbolizing a hopeful stride towards economic equilibrium and resilience in Namibia.
According to Simonis Storm, if we look ahead, despite the forecast of a minor surge in the near term, the overarching trajectory suggests a steady diminution in inflation rates.
“This anticipated downward trend bodes well for the economic landscape, fostering a more stable and predictable environment for both businesses and consumers,” said the research firm adding that Namibia’s November 2023 inflation rate of 5.7% reflects a significant deceleration, hinting at potential stability in the cost of living amid global economic dynamics.
“The food sector shows signs of easing, despite occasional price escalations in specific items. The decline in transportation inflation, driven by falling fuel prices, is anticipated to extend into December. This enduring pattern of goods-driven inflation in Namibia remains intricately linked to and influenced by international economic currents and fluctuations.”
In November 2023, Namibia’s annual inflation rate stood at 5.7% y/y, reflecting a deceleration from the 6.0% y/y rate in October 2023 and 7.0% y/y rate in November 2022. This signifies a slowdown in the rate of inflation since it began to rise in August 2023. Monthly inflation rate also stood at 0.3% m/m in November 2023 decelerating from 0.8% m/m that was recorded in September and October 2023.
In a regional comparison, Botswana reported the lowest annual inflation rate at 3.1% y/y as per the latest data from October 2023. South Africa recorded a 5.9% y/y rate in October 2023, with an expected deceleration in the November figures, mainly due to reductions in fuel prices. In contrast, Namibia’s inflation rate was at 6.0% y/y in October 2023, which then slowed to 5.7% y/y in November 2023.
The category of food and non-alcoholic beverages maintained its position as the predominant factor in driving inflation, contributing 1.8 percentage points to the inflation rate in November 2023, as per both m/m and y/y analyses.
Additionally, the category that has exerted the most downward pressure on consumer prices is exhibiting signs of relief. In November 2023, this category’s annual inflation rate decelerated for the eighth month in a row, registering at 9.2% y/y. This rate represents a deceleration from the 9.4% y/y observed in both October 2023 and November 2022. Specifically, the annual inflation for the food subcategory remained at 9.2% y/y compared to October 2023 but down from 9.5% y/y as compared to November 2022.
“This trend of easing is partly due to the ongoing decline in global food prices, which is gradually affecting local food prices compared to the previous year. However, consumer demand continues to be subdued, influenced by the lingering effects of high interest rates and overall inflation.”
In a year-on-year comparison to November 2022, certain food items experienced notable price increases. Fish showed a substantial rise with an annual inflation rate of 16.9% y/y, contrasting with 4.2% y/y in the previous period. Similarly, the categories of milk, cheese, and eggs witnessed an increase, recording a 12.6% y/y inflation compared to 6.5% y/y in November 2022. Vegetables also saw an uptick, with an annual inflation rate of 16.9% y/y, compared to 10.1% y/y in November 2022.
Conversely, the prices of bread and cereals, meat, oils and fats, as well as fruits, experienced a slowdown in their rate of increase.
The category of alcoholic beverages and tobacco made the second-largest contribution to the November annual inflation. This category experienced an overall increase in inflation, driven by specific increases in both alcoholic beverages and tobacco in November 2023, with rates of 8.5% y/y and 5.9% y/y, respectively. The rise in inflation within this category can be attributed to notable price increases in sparkling wines and champagnes, along with an upward trend in the prices of pipe tobacco.
The annual inflation for the transport category in November 2023 was 5.1% y/y, marking a deceleration from 6.6% y/y in October 2023 and a significant drop from 18.3% y/y in November 2022. This slowdown is primarily attributed to the operation of personal transport equipment, particularly diesel and petrol prices, which experienced a significant deceleration in November 2023, recording a 4.5% y/y inflation compared to 46.1% y/y in November 2022.
“The Namibian Ministry of Mines and Energy announced no changes in fuel prices for November 2023. However, for December 2023, a cut of 130 cents in the prices of both diesel and petrol was observed (effective as of 6 December 2023). This drop in fuel prices is expected to further ease transport inflation for December. The decline in diesel and petrol prices is influenced by lower international product prices, while OPEC+ seeks to keep oil prices above $80.0/bbl, though the certainty of compliance remains unclear,” said the firm.
In November 2023, the inflation rate for the category of furnishing, household equipment, and routine maintenance stood at 5.3%, showing a slight slowdown from 5.6% y/y in October 2023 and 10.5% y/y in November 2022. As for the housing, water, electricity, gas, and other fuels category, which constitutes 28.4% of the consumer basket, the inflation rate in November 2023 was 3.2% y/y. This category contributed 0.8 percentage points to the overall inflation rate in November 2023.
“The marginal increase in the annual inflation for this category can be attributed to price increases in all subcategories, except for the regular maintenance and repair of the dwelling subcategory, which experienced a slowdown in prices.”